Baroness Noakes (Con)

My Lords, I rise to move Amendment 18 and to speak to Amendments 21, 24 and 25 in this group. These amendments are designed to make the national insurance increases in the Bill more manageable by businesses, as they are going to be picking up the lion’s share of the costs of national insurance in the first instance. The amendments do not change the overall approach of raising the rate and lowering the secondary earnings threshold; instead, they seek to phase in the secondary threshold reduction over two years, rather than taking the “big bang” approach taken in the Bill. The reduction in the secondary threshold is the larger of the two main changes in the Bill, raising roughly one and a half times the amount raised by raising the national insurance rate of contributions. I should declare my financial interests in a wide range of listed companies, many of which operate in the UK and are therefore affected by the Bill. These include shareholdings in Next plc—which gives me a neat segue into the fact that I was prompted to table these amendments after listening to a “Today” programme interview with my noble friend Lord Wolfson of Aspley Guise, in his capacity as chief executive of Next, who argued for delayed implementation. I was delighted when my noble friend then added his name to my amendment, along with my noble friend Lady Neville-Rolfe. I very much look forward to his contribution to the debate. I was particularly struck when listening to the “Today” interview by my noble friend’s analysis of the financial impact of the changes on part-time jobs and those that pay at or around the minimum wage. I think he said that it will add roughly 2% to the cost of employing higher-paid workers, but for part-time and lower-paid workers the figure is 6.5%. This, of course, is before you factor in the minimum wage hike, which will be coming in at the same time and will more than double the impact on certain kinds of employees, particularly younger ones. I spoke about the regressive effect of the Bill at Second Reading and I was frankly astonished that the Minister’s Back-Benchers were not jumping up and down about the impact of the national insurance changes on the employment prospects of key groups such as female part-timers and young people. His Back-Benchers seem to have bought the disingenuous line, which has been run by the Chancellor and, indeed, the Minister, that these extra national insurance costs will be borne by businesses. The plain truth is that employers will not simply absorb the cost increases, as the Office for Budget Responsibility made abundantly clear: employees will pay, in the form of reduced hours, reduced pay increases or job losses. We will all pay in higher prices and, if that keeps interest rates higher for longer, home owners will pay too. Part of the problem from the business perspective is the sheer scale of the increase in employers’ national insurance contributions, hitting them in just a few months’ time, at exactly the same time as the minimum wage hike. I expect that the Minister will say that the minimum wage increase is not in this Bill, but the plain fact is that businesses are facing a double whammy. Very few businesses can shrug off an increase of well over 10% in their payroll costs. The likelihood is that businesses will take rapid action to try to curtail the financial impact, but that action may well be suboptimal when looked at over a longer timeframe. Recruitment freezes are the quickest way to put a lid on costs and they are already a feature of today’s uncertain business environment. The recruitment sector is therefore struggling and will doubtless have to reduce its own headcount in due course. If hours are reduced for part-time staff, that will have a particularly hard impact on women and their families, who are often dependent on the additional income that such jobs bring. Pay increases, other than for those on the minimum wage, will probably be held down, and most families are already struggling with inflation and will be hard hit if wages go down in real terms. We can also expect employers to reduce headcount. This is already happening, as a glance at the business pages of the media will confirm. The noble Lord, Lord Eatwell, who is not here today, may well run his argument that this is entirely healthy, because it will encourage businesses to invest to reduce their reliance on labour and thereby increase productivity and release workers to be redeployed elsewhere in the economy. As I have said before, that is a nice theory, but it fails at a practical level. Businesses need confidence in the country’s economic prospects before they invest, and most business confidence surveys are well into negative territory. Many investment decisions are already on hold or being cancelled. In addition, we have high employment at present, thanks to the previous Government, but job vacancies are relatively low and falling. A more realistic outcome, at least in the short term, is that there will be fewer people in employment. The OBR calculated the impact of the national insurance changes as a loss of 50,000 jobs, but it could easily be higher than that. My amendment is about ameliorating the short-term impact of the Government’s national insurance changes on businesses, so that they have more time to plan how they will absorb the increases alongside the additional minimum wage costs. If businesses have more time to work out the best way to cope, the impact on jobs and pay could well be softened. My amendment merely delays the full impact of the national insurance changes for an extra year, by phasing in the reduction in the secondary threshold over two years rather than make businesses face the whole impact at once next April. I am quite sure that the business community would prefer an even longer phasing in and would prefer it to apply to the increased rate of contributions as well as to the reduction in the threshold. My amendments are an attempt at a reasonable compromise. I beg to move.